tv Fast Money Halftime Report CNBC December 31, 2018 12:00pm-1:00pm EST
alley. the rollover in stocks was an ugly signal and we're seeing this rally evaporate >> ash cashin knows what's up. shopify, an amazon competitor? >> you always pull out stocks that i wouldn't necessarily look at >> i can pull out the little ones who else pulls out stocks, "half time" at post nine, that will do it for "squawk alley" in 2018. scott wapner takes it from here. >> and welcome, i'm scott wapner after the worst year for stocks in a decade, can your money begin working again in 2019 or is more pain ahead it is 12:00 noon and this is "the halftime report." >> the clock ticks down on 2018. as traders position themselves for the first week and month of the new year, today the best places for your money in 2019. we'll tackle the key issues for investors -- washington, trade, the fed, confidence, and more, plus if apple is the key to the
market as many claim, is that stock about to make a triumphant surge? "the halftime report" starts right now. >> welcome good to have you with us at the new york stock exchange at post nine josh brown, jim leventhal, john najarian and amy raskin of chevy chase trust. can the new year bring new life for the bulls? doc, they could use them >> we could all use it >> what are you thinking about as we head into a new year now >> well, we of course gathered ourselves a little at the end of last week. >> a little bit. >> thank goodness, and that felt a little bit better, after that beating that we took on christmas eve, judge, the beating for all of december, for that matter. >> right >> i think the market is going to grapple with exactly what we've talked about, what the
network talked about for days and weeks. when will we come to a conclusion with the trade deal with china that is not going to be a binary event, scott that's going to be something that plays out over time, and so for that reason, i think volatility, although they've come down by about 5%, even though the market's given back a lot of its upside pop today, volatility is still contracting. because a 30 vix means you're looking at 2% moves. we're not really anticipating that much more volatility but significantly higher than we saw at the beginning of this past year >> i find josh, frankly, little belief in the market headed into 2019 the way that december unfolded, yes, we picked it up a little bit to end this, you know, difficult month, in what's been a difficult year where is sentiment certainly doesn't feel that great. >> yes, so the setup, though, is not terrible for intermediate to long-term investors. when you come off a bad year
like this, the next year really doesn't have any rhyme or reason or anything to do with it, and if you think about how great sentiment was going into the start of this year, how great were the markets going into all through 2017, but toward the end, it was just this incredible melt-up. within a month we were in big trouble. we were in the first of two 10%-plus corrections >> remember january? that felt the blow-off top of the bull market. we look back and say maybe it was. >> it actually could be, and so i wouldn't get too carried away about how bad december has been and what that might mean for january. the other thing i would just say, though, the big takeaway for me, and i seem to relearn this lesson every year i'm doing this, 20 or 21ers yoo, diversification still works. so the narrative earlier in 2018 was that treasuries were dead money at best and dangerous for your portfolio and your health at worst, and actually, it turned out to be terrible advice treasuries did their job this
year they weren't all up across the entire curve but when you look at what they did for you in the fourth quarter, they absolutely acted like a diversifier, even when people were concerned about the u.s. government and the deficit, they still worked, and i think that will be the story in the first quarter next year you don't want to be all stocks, you don't want to be no stocks you got to maintain that diversified portfolio. you never know when a december 2018 scenario is about to loom its head >> this is the first year in three or four years people haven't been calling for the ten-year to be 3.5, or approach 4. >> we're at 2.8? >> 2.7 i think this is a good setup i was on the show august 28th, i was cautious lot of people disagreed with that at the time earnings i think i put up a chart that -- >> why did you look at jim when you said a lot of people disagreed. >> no, he wasn't on at the time. >> i saw that, okay? >> yes i showed a chart from bca showing earnings expectations were as high as the bubble
basically. you don't want to own stocks when earnings are growing 20%, that's not the time to own it. the time to own stocks is when sentiment is more worried, people are scared, wringing their hands. i think, barring a trade war, which is a huge if, this market works in 2019, but that's the key. that's the most important. >> that's the key, so jim, you think so, too you get to 2019, the fed is the biggest wildcard there is >> the fed could do a lot of positive things here if they back off their stance. the biggest issue here, scott, is the trade war the only thing is, it's not the only issue you have a hostile congress coming in. there's going to be fireworks, pelosi and schumer versus donald trump. you have the mueller investigation that may come to light sometime in february you got brexit, and as amy mentioned, you've got potentially a trade deal coming by the end of february all of these things could go either way, and the market, you mentioned sentiment earlier, scott, sentiment teeters one way or the other on the outcome of all of these things, but i do
think the trade war is the biggest issue, because that has the most direct effect on profits. it has the most direct effect on capital expenditures, aggregate demand, profit margins, et cetera if you get that solved the other risks become secondary, part of the wall of worry that the market can climb >> do you believe that i feel the fed is the biggest risk to this >> i don't think they're going to raise rates anymore i think the market is clearly telling them, if they don't listen to the markets, that would be a huge negative, but the markets are speaking very clearly right now and saying don't raise. >> we've had six corrections outside of recessions. the average is 19% that's been our downturn this time the fed has paused or cut five out of six of them if the market stays where it is or goes down further, the fed is out of the game. but this whole bull market has been a margin-driven bull market we've had margin expansion from lower taxes, before the tax cut and draw-backs and effective tax rate coming down, last quarter
was 14%, that's behind us, from lower interest expense, that's also behind us, supply chain management, so if you start going at that globalization supply chain management and reversing that, you get, you're not going to get any further margin expansion and i think this rally is over >> you aren't alone thinking the fed will back off. goldman, which had four hikes for 2019 has come down to one. >> right >> now the first half of next year to 2%, down from 2.4%, so they've come in, even though they're not worried about a recession, they say it's unit he miable it's slowing. >> chicago is looking for cuts in 2020, so look, those forecasts will always be massaged as you get closer to the event and they're subject to change >> part of my point is oh, how quickly they've changed. >> they'll change again. >> the world feels like it's changed quickly. >> my personal opinion, two personal opinions that i hold, they're weak opinions but i hold them strongly.
the first is, this is not a moment to have a very, very, very strong binary opinion on what next year will bring. a, there's no reason to, because of the point i made earlier about diversification. by the way, merging market stocks outperformed u.s. in the fourth quarter it's been a while since we've been able to say that. let's put that aside my other very, very strong opinion right now, or my other opinion right now is that it's going to be binary, meaning if you have a recession, it's a very different situation for stocks than if you don't have a recession, and i don't think they'll be within 10% of each other. i think a recession is 25% lower, even from here. >> i agree >> and a non-recession, i really think we could have a great year in 2019. >> unless you think that the trade war happens or the fed does something off the mark, it's unlikely -- >> inflagrante, do we agree? it's happening >> if it keeps happening, you
will have the market go down and probably cause a recession and as closer to 2020, the ea person in the white house is not going to like that >> i see the typical 7% to 8% growth for the market here i didn't throw that out. it's going to be big up or down. >> he mentions tamy mentions do. you see rubini's op-ed, we'll show you the headline, president trump flirting with mutually assured economic destruction he says the risk of financial crisis and recession have grown. talks about policies that have stagflationary effects and economic cold war with china the markets largely ignored all of the risks of the trump presidency because of the tax cuts, thinking that his bark was really worse than his bite now everybody's coming around to the point of view, according to
roub ro roubini and they'll continue in '19 that you're realizing the bite is pretty heavy along with the bark >> the reason he was able to at least bark, if you will, judge, without the bite, was that he had the tax cuts, and he had the momentum in the market, and that's the time when you could apply what he did. now, we can argue whether or not it was the right thing to do, even though the timing was right, because you don't want to do what the president did, if the market was rolling over. that's one thing i think that works in our favor, going forward, is that the market has rolled over. so he can't be as aggressive as he was this time last year, because we're not riding the big, you know, swoop >> you're right about that you're right about that. he actually said it publicly, or he said it and an aide repeated it to the press, the concept he was playing with the house's money about three months into 2018, after how well the market did in '17 i actually think he does have that gambler's mentality, and
what does the gambler do after they get stung in a bad hand, they get conservative, and i think that's probably a more likely outcome than ratcheting up more which is what the market is concerned about >> hang on, one at a time. >> one more, quick, is that the fed is going to be much more reactive than china will be. china, as we've seen, is very slow to react, and anybody that thought they would have been quick to react to anything positive or negative out of the president would have been mistaken they are much longer term, and so the fed will move quickly they already have. they've pulled back, we think, pretty dramatically, and our outlook and i bet the rest of you agree as well. >> as we're having this discussion and all the risks, not just the fed, not just the president, they all seem to be coming home to roost in the first quarter. that's the reason i'm comfortable holding some cash as an equity portfolio manager holding some cash. i expect the first three months of this year you're going to get
a few whooshes i sold apple at 201. i love it at 158 i'm willing to get it at below 150. this is a time for patience. let the volatility, john, work to your advantage, have dry powder to put to work. >> let's go to washington, d.c., in fact, for some breaking news on a new democratic spending bill elon, the shutdown is in the middle of the second week. >> democrats settled on a plan to reopen the government, this comes from a democratic aide who tells me that a vote will happen on thursday, and he described how it's going to go down. there will be two bills. the first bill would fund all of the affected agencies except for homeland security. they receive full funding through the end of the fiscal year the second bill would focus only an homeland security that agency would be funded through february 8th, and its funding would be unchanged, a so-called continuing resolution. now, i'm told the point behind
this is that democrats feel that they've made a lot of progress in a bipartisan way to work on some of the spending bills for government agencies. they don't want to lose that work however, they want to give themselves some breathing room on homeland security in particular, which is the agency that would fund the border wall, in order to have that broader discussion over border security and over immigration now, it will be up to mitch mcconnell, if this does pass the house, to decide whether or not to bring this up to the floor for a vote in the senate his office tells me that it is simple the senate is not going to send something to the president that he won't sign. so once again, we could be in a situation where the house puts something on the floor, the democrats pass it, and then it gets kicked over to the senate, where it could lie in limbo for some time unknown. we'll have to find out what happens when that vote actually takes place. scott, back over to you. >> we've already gotten some clues, you mentioned mcconnell's
office lindsey graham has been on the tube, no money for the wall, no deal is what he basically said >> that's right, but it's unclear what that wall actually means. lindsey graham said the wall was simply a metaphor, symbolism for border security. we heard that from outgoing white house chief of staff john kelly as well saying it's not a wall, actually, that it's just border security, but then you had president trump out today saying it is a wall, they never walked back from the idea of having a concrete barrier at the border so that is part of the discussion the democrats say it could take place if they extend funding for homeland security just through february 8th >> ilan, thank you back with the latest in d.c., just another thing, amy, for the market to think about. >> yes, i'm not particularly worried with the shutdown, because of how it happened and unfolded seemed chaotic. you have that really strange meeting between trump and pelosi and schumer, where he sort of dug in his heels up to that point, it was he was going to sign it and it would be
fine and there's money for the wall and you have his incoming chief of staff saying it's childish, and absurd so it just seems like this was, i'm going to dig my heels in because i want to win, and 800,000 people who aren't getting paid and poshlly cannpo make their rent or buy medicine. it feels like a chaotic shutdown for i'm not sure why >> i don't think the market is acting the way we thought it might, given the reality that it's a shutdown headed into week two, and we know the congress changes in, i don't know, eight hours. i think like it's actually a positive sign that the market has been able to stabilize during the last two weeks? >> the markets don't usually react to shutdowns they usually are non-events. what scared me about the shutdown was what this means for the trade war. if some of the press reports fox news got them to change his mind
because they don't want him to deal, if that's true, i have no inside information if it is or not. that could play out with china and the trade war. that's what's scary but i think that was the last leg down >> if we're reporting on some calming of the chaos that comes from washington, d.c., i think we're counting on the wrong thing, especially with a hostile congress coming in he wants to stir things up they want to stir things up, so when i see tweets about hey, we're getting something done with china, i hear him possibly reaching a compromise about border wall funding, i think to myself, what's going to happen wednesday, what's going to happen thursday? >> i don't think the market, frankly, pays attention to the great progress made on the trade front with china tweets anymore. i think the market learned its lesson after the first 40 of those that it only has a limited impact look, the dow was up 250, almost 300, 280 >> scott, i didn't buy into it >> cut in half, up 145 we talk about all these risks, whether it's fed, trade, chaos,
d.c., bickering, et cetera i want to talk about some individual stocks that could hold the key to 2019 i think many people may agree, apple one of them. knocked off the mantle of the trillion-dollar market cap, knocked off the mantle of the biggest market cap company publicly traded on planet earth, what does 2019 hold, doc, for apple and how is its performance important to the overall market? >> i think apple can't be underplayed as far as how important it is, because here is a safe play, if you will, scott, i believe, at this level, the same that jim just described, 158ish i bought and do i wish when josh and i were talking and we bought it at 16 had that i would have bought a lot more, no. i'm happy i've been scaling into it, so i think at the level it got down to, a little over a week ago, that that was stupid, and i don't know if people will
get another shot at some 150 to your point, jim, but i bought more, and i think this is a stock that is going to continue to work, no matter what these, because we're not going to get the breakout in the numbers, of course, when we get the next earnings report. that's what the temper tantrum was about. >> do you think this will continue to work, the stock is >> i think it will start working again, everybody's had ra quarte to pull their hair out and get angry about apple decision not to give us a break-out of their numbers. >> this has to be more than just about a tantrum over the disclosure issue >> that was a big tantrum about that >> i understand but it is fundamental questions about the strength of the iphone >> the first thing i think, though, that we need to keep in mind, is a lot of drama, because of the size of this company, and how rapid it fell, and the drama is well-deserved i'm not saying it's misplaced. however, when the stock was at 161, now it's at 158 and obviously it had a very big
loaning round trip to get there, but if it was a $16.10 stock that was now trading at $15.80, this would not make the "a" block. judge, you know i'm not frontin' about that the other thing i would say and i think it's important, you happen to have the two biggest sized buyers on the planet, supporting the company, supporting the stock one is warren buffett and the other is the company itself. could you ask for a better tailwind, berkshire hathaway and apple itself out there as size buyers on weakness so i do think that we've seen a huge amount of destruction to this name and a lot of it will prove to have been unwarranted as time goes by. i don't think anything major has changed. >> great point you make. great points, plural >> for the viewers at home, think want them to keep track. >> it's about time just kidding worst dow stock in the quarter, jumped 30% >> it was delayed in its response
netflixs, the facebooks of the world, they had their falling out of bed ceremony in july and june and august, so this one was just late. i think it is a one-quarter issue, by the way. once you get some clarity on how iphones are sold >> come on, you're the one who was the loudest how annoyed you were because they stopped the disclosure >> and i am annoyed by that. >> are you going to come back and say, jim, we're just joshing you? now we're going to give you the numbers? >> it was a symptom. it was not the root cause. what the root cause is, people fear iphone sales are slowing and they feel a symptom of that was the company's unwillingness to continue to provide disclosure >> it was so great they wouldn't say we're not going to tell you. >> that concern can be put to bed on the earnings call, particularly for the holiday season, which is their biggest quarter and we'll see how sales did and services did one thing that i think is inarguable it's ridiculously cheap. i wait for 150 because i think you'll get a whoosh in the
markets, scoott i'll add to it around 150. i'll take advantage. >> i'm not sure this is a one quarter issue. at some point you'll get more hype and people back into the stock. it was overdone on the upside. we took a big chunk out of the stock in the third quarter people were saying it's a services company it was always an iphone company. at some point you will get people rushing back into the stock in a big way just because it went too far, too fast >> you can think of another company that can add $100 to the price of any of their offerings, whether it's this -- >> not change, no. it's $100, every 18 months >> i want to believe you i sole some of it but not all of it the basic truth they did tail off demand when they raised prices that much people look at cheaper phones. >> the elasticity wasn'ts much
as it is from those products >> am i being too cute, yes. listen, i'll take the criticism. i'll take the criticism. it's valid >> you said the price here was, in your words, ridiculous, yet you wait for $8 cheaper? >> yes >> come on, tim. >> you guys going to peer pressure me? >> pull the trigger. >> it unt doesn't make sense toe >> i sold a third of the position at $1201. if i thought it was a bad stock i would have sold the position i retain two-thirds. when i add the same dollar volume back i get more shares. look, you can make the criticism i'm being too cute i'll take that if i'm wrong and it goes to 16, those are shares i sold at $201. >> i'll be back at you >> i know it's what you love to do and i love you, too
having said that, i think in january you're going to get some more volatility in the market, and look, i'm putting the stake in the ground, 150 i'm back here >> part of our point, it's come down a lot many of you say is overdone. >> scott and jim i'll push back, which i rarely do with you >> i love it >> we're going to get more volatility or some sort of pop in volatility in january >> our buddy kevin o'leary thinks it's going to 140 i'm not waiting for 140. minute he's right but i'm not waiting for 140. >> in the context of apple if you look at fangs at large these stocks dragged down, are they done trading together as the fangs? >> i think they have
they have. do they come back together or do they remain these disparate stocks >> i don't think they'll come back together and i think with good reason. it's very much like the brics, brazil, russia, india, china, as though they were the package deal and smarter people came along, half of the countries are energy exporters the other half need to buy energy, they're importers. what do they have to do with each other i bought amazon and this a ludicrously low buy limit order in, good until canceled for three months, got hit 35% from amazon's high in september, i got hit ten days ago, i was excited about it i was not doing the same thing with facebook, was not doing that with netflix. both are challenged for at least the first half of next year. i don't want them, and i own google and i added to that as well i do think we'll trade these separately and i think the fang thing is over.
>> i'm with you on amazon and google >> are you going with that >> no. i think zuckerberg has several challenges, not the least of which governmental oversight which might come down hard on these guys but also trying to get developers to get back in there, after he has not dealt fairly, i would use a different word, but -- >> trust of their users, trust of investors >> why would developers wok on something with this closed system >> they've proven themselves to be untrustworthy >> demographically they're challenged, too. first of all, instagram is at max ad load. somebody tweeted earlier, instagram is now qvc for millenials you could not put another ad into my instagram feed, if i had two phones, that's the only way you could get me to see more they've maxed out ad load. have they maxed out ad prices? the products get worse and
worse. they want me to buy brooklyn dodgers branded pajamas. they're not selling top shelf stuff on instagram >> you don't already have them >> i think the facebook core business, whatever i just said about instagram, throw it out. at least it's growing. facebook core is not i think there are real challenges there >> i agree >> they're not going away, because the calendar turns over. >> we have to bounce for a couple minutes here is what else is coming up >> one analyst's big call on nike and under armour, why she thinks both stocks will run hard for your money in the new year before the break, the top performing sector in january since 1990, tech up 2.4% on average, trading higher two-thirds of the time for more, go to cnbc.com/kensho. "the halftime report" with sttco wapner and the traders is back in two minutes
at comcast we know our customers' time is valuable. that's why we have 2-hour appointment windows, including nights and weekends. so you can do more of what you love. my name is tito, and i'm a tech-house manager at comcast. we're working to make things simple, easy and awesome. hey, everybody, jaime leventhal here you know my favorite part of the halftime report, you send your questions and we answer. cnbc.com/halftime, and we'll answer it on air i can't wait thanks go to cnbc.com/halftime or get us on twitter #askhalftime. >> was he wearing a tan jacket >> it was the summer >> he's an all-season guy. >> i feel like it's almost disrespectful. >> you need to record a new one.
>> were you at the stock exchange >> when are the questions coming i can't wait >> piper jaffrey calling nike, und under armour, ulta their top picks of 2019. amy, what do you think >> i thought it was a great call the stock's done really, really well their digital initiatives are paying off in dividends. i love everything they're doing. the stock has outperformed and it's a big weight for us if it keeps outperforming at this level and i see opportunities in other stocks, i may trim but they are on fire, doing almost everything right. the 12-city, 10-country strategy is great their new innovation i think nike is the one to own >> they're all in on all three of these names overweight across the board. under armour gets a 69% upside they say it's one of the better names to own into '19.
>> under armour has been one of the names that every time it has a good quarter, the next quarter is a bomb, and if it can break that cycle finally and have some incremental positives with each quarter they report, i do think attitudes around the stock will change and i think a lot of shorts, frankly, will come out of it and look for something else to go after, but until then, like i would rather pay up for it, once we know that they've really gotten the stock on solid footing i'm not saying they'll be wrong or it can't happen i'm saying technically, the market is not buying into that just yet >> still up quite nicely year-to-date, doc, is under arnl you armour it's going to have in total a pretty good year as it gets a lot of these issues out of the way and looks forward. >> you don't see nearly the amount of excess inventory, just being shoved out the door into the t.j. maxx, marshall's
outlets. this means planck and the team are managing better and more in line with what the consumer wants. if they were shoving that much more out the door before, that wasn't what the consumers wanted of these, though, i like the sephora and ulta ulta is the one they talk about but i like that, because i just can't believe the margins they continue to get at these kinds of stores, whether it's ulta or sephora. i think that is a very interesting play, even though it's 21% >> everyone is trying to look good for the gram. >> $295 price target. >> keep your eye on lvmh as well because i can't imagine too many things they're doing wrong >> headlines outside of the world of business with sue we'. >> hello, everyone here's what's happening at this hour manhunt is under way in texas for the suspect of a drive-by shooting which killed a
7-year-old girl. sheriff deputies say a family was leaving a walmart parking lot, when a red pickup truck drove up to their car, and the man inside started shooting. millions of workers will get a raise starting tomorrow, when new minimum wage requirements take effect in 20 states the increases range from an extra five cents per hour to $1. americans want to get control of their money in the new year, according to fidelity investments, nearly one-third are planning to make a financial resolution in 2019 the top three goals? saving more, paying down debt, and spending less. and volunteers are putting the finishing touches on floats for the 130th rose parade. organizers say it took builders nearly 80,000 hours to decorate this year's 44 floats. and of course, the big game, ohio state and the washington huskies will face off in tomorrow afternoon's football game can't wait to see both you're up to date. that's the news update this
hour scotty, back to you. >> sue, thank you. sue wherrera, maybe it should have been ohio state against clemson instead of notre dame. >> i would say you're right about that, although i'm one of the folks that thought they had a chance i thought notre dame had a chance >> they did have a chance until the game started unusually activity with john najarian is on deck. we'll see what options he's watching into the new year, often a great predictor how a stock will move, we will adough it next on "halftime report. before the s&p still positive by 12.5, there you go, leading the way today health care, been the best performer of the year, best performer as the year ends ckft ts. (drumsticks clatter) a moment of joy. a source of inspiration.
and a full education curriculum- just to help you improve your skills. boom! mad skills. education to take your trading to the next level. only with td ameritrade. ♪ we are back at post nine, new york stock exchange. john najarian is at the telestrato telestrator, couple names in unusual activity, pepsico is number one >> obviously from may to june, it made a very nice move
people are looking for it to make another nice move into june next year, 2019. why do i say that? because that's the calls they were buying. they weren't buying short term stuff, so maybe to jim's point, people are anticipating volatility and/or market distractions or dislocations they want to be in this thing for the longer term, though. look at the number they traded about 8,000 options and they did almost all of them in one print, and these weren't cheap options. the 115 strike is what they were buying they're out there in june. i'll probably be in these right around 30 to 60 days, judge. second trade, take a look at public storage psa. this is a read of course, they run storage facilities around the country and of course, they pay a nice fat 4% roughly dividend it's public storage, a little over $201, virtually unchanged on the year. they came in also buying june, in this name, check out the strike they're buying with the
stock at about 201, they came in buying the 210 calls i like that. i put on a spread in this case because it's all the way out there in june. i'd like to hold this one a long time so i put on a spread rather than playing for a very, very quick pop, because it's a read >> good stuff. come on back over. coming up, we have an insider's look at the state of hedge funds, after a brutal year we're speaking to a man who helps allocate billions of dollars to the industry, see what he thinks about performance and opportunity in the year eaahd. that's next on "halftime."
we're back on "the halftime report." hedge funds have been under pressure due to poor perform as, investor redemptions, high fees, among other things are things going to change in 2019 eric costa tracks the industry as the head of global hedge fund research at cambridge associates he's here at post nine good to see you. >> hi, scott >> you allocate about $55 billion to hedge funds >> right >> are you still going to allocate that money in 2019? it's been rough sledding lately.
>> it has. it's been a tough few years for hedge fund investing we're working with endowment foundations and pensions that have unlimited time horizons all we need to find the top 1% or 2% of hedge funds in the world. there are 10,000 hedge funds in the world and we can certainly do that. >> what kinds are you looking for? >> well, today, i think we're looking at discretionary global macro, with all the volatility in the markets, with dispersion between central bank activity, with the volatility at fx and the rates, there is a lot of opportunity for really talented global macro managing. >> if i say the future of hedge funds is what, how would you fill in the blank? is it bright is it dark >> i would say the next several months will be a really interesting period i think we're going to see a lot more shutdowns and winddowns in the hedge fund industry. i think will be difficult to raise money in the short term for new launches but i think once we get through this period
over the next few quarters, i think the future could be bright, if we're seeing a market transitioning from the new normal back to the old normal, i think it could be a really interesting time >> so when you say just find the best 1% or 2% of hedge funds, i guess my comment would be, why doesn't everyone just do that, and then isn't really the only way to identify the top one or two in hindsight, and then once they become that top one or two, they get overallocated by folks like yourself, and then obviously they can never, ever again do what they had done when they were emerging managers, working with less money, and less attention being paid to their strategy >> too big, less nimble, sure. >> is it significant to do that and has anyone proven, >> any academic literature that shows that anyone has that ability to identify the top even 10% a year in advance, three years in advance i don't know, seriously, what your thoughts are. >> all great questions there are dozens of hedge fund strategies certain strategies do bet we are large amounts of capital like
activists and quantative strategies and others do better with smaller amounts of capital. so what we want to see is managers that are incentivized, aligned with us, and motivated to perform, not to grow these massive businesses, to live off of management fee. so a lot of what we do is research their behavior, their actions, and what they're really going after. is it capital appreciation or is it to grow a large business? and i think a lot of the very, very small managers just aren't sustainable businesses so they're not funds that we would typically partner with >> you're sitting next to somebody who -- >> not a huge fan of the asset class. >> -- is not allocating money to hedge funds. >> well, who is? >> we don't allocate money to outside advisers in general but as an asset class, i don't understand why it makes sense. the market goes up much more than it goes down so you're paying a lot of money for a hedge that you often or more often than not, 77% of the time don't need >> um-hum. >> there's so much competition
in the industry. aren't they just killing each other, and if they couldn't perform this year, in a down market, i've heard for the last like nine years that okay, hedge funds are not outperforming because they're hedged and we've been in this huge bull market. now we have a down market for the year and they're still underperforming and you're paying a lot for that underperformance >> sure, sure, so what i would say is look, we've been in a longest bull market in u.s. market history >> but this year wasn't. >> this year was, up until september. >> so you think they'll end the year ahead of the market >> no. well, yes -- no, i -- >> you do? >> a year ahead of the market. however, i think the next ten years will probably not look like the last ten years, so we're setting up for, you know, a whole different period >> didn't you say that ten years ago? >> after 2008? not so much. >> one of the reasons we wanted to have you here is for a fabulous thing that you're trying to do for the boston children's hospital. you've actual lay plily appliedr season 11 of "american ninja
warrior. >> yes >> my kid loves that show. >> if you win, you'll donate the million-dollar prize to the hospital >> all of it, yes. >> why this? >> my kids challenged me to get on the show. i accepted the challenge but i wanted to do something bigger and have a real impact personally and it's part of our firm values. we try to have a positive impact, so i accepted the challenge. boston children's hospital is very important to me my sister was treated there, two nephews treated there. it's a research hospital, so they're finding cures to diseases and finding ways to treat new, to treat problems with children, so it was really important to me to do this i spent two years training >> that's how you can dote nana you raised about $17,000, looking for $50,000 fo good luck, we'll see you soon.
thanks to eric costa of cambridge associates up next, it's "ask halftime" we're taking questions ollie in oklahoma has one for former jim is it time to get back into winnebago? the stock is down 42% in six months >> it's a good mid certain company. >> we want to hear from you, go to cnbc.com/halftime tweet us @halftime final trading day of 2018. we are right back. ♪ ♪ hi. this is the man that's going to check your eyes grandma. cognizant ai solutions are helping healthcare companies advance diagnostics and prevent blindness in patients with diabetes. everything looks good. you have beautiful eyes.
it's .95, almost penny for penny it's moving in a direction index. that's really where i would start if you have a question, look at the general direction on this space and i wouldn't be expecting gains so long as the entire space seems to be in a tailspin. >> ali in norman, oklahoma. >> whoa, nellie. >> writes in and addresses you as farmer jim. >> love it. >> is it time to get back in a winnebago? >> i have a great affinity for oklahoma glad to get your question. yes, it is. >> wow, you heard it here first. >> this company continues to outperform, every single quarter for the last year they've blown way the estimates. i don't think we'll get a recession, which this thing is priced for any valuation you look at, it's ridiculously cheap the sentiment has been but yes,
it is time. >> john nagarian, i just bought xlu. see any major issues with that >> no, sir i think we've topped out as far as rates i know people are fearful as far as when rates are moving up, judge, people dump out of utilities. i think that anticipation has created great values here. by the way, over the last 20 years, xlu, that etf for utilities, has outperformed the s&p 5006.7% to 7% the last 20 years. >> finally, frank in new york asks what are the trader thoughts about visa? you own it. >> we like visa. it's a big holding for us. raising guidance, growth, good trend. we like it. >> we'll step away for two nus co back and do the final trades of 2018 naturally , causing a lack of sharpness, or even trouble with recall.
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we are back. time for final trades. first off, happy new year. and to our viewers as well, wish you a very happy, healthy new year prosperous 2019. >> let's hope. >> that's for sure. >> beautiful, scott. >> amy, kick us off. final trades. >> way like splunk, unstructured data analysis, helps companies figure out what to do with their data growing revenue 50%. really strong margins. increasing number of seven-digit
customers. we like this. >> john najarian. >> farmer jim? >> they're all lining up in times square to buy intel, scott. >> josh brown? >> amzn, sticking with it for 2019. >> thank you so much thanks for sticking with us as well "power lunch" begins now. >> thank you, scott. hi, everybody. i'm kelly evans. interest rates are sinking again and oil is trying to stay positive what will 2019 bring your play book straight ahead. tweeting positive news on china trade and the dems are preparing the plan to end a government shutdown don't forget the fast-approach ing deadline media, deals reshaping hollywood as netflix, google,